Pursuant to the Dodd-Frank Act, investment advisers with $100 million in assets under management (“AUM”) must not only register with the Securities and Exchange Commission (“SEC”) by filing a Form ADV, but now must also register with state securities regulators. Prior to the enforcement of the Dodd-Frank Act, the AUM threshold which triggered SEC registration requirements was $25 million, and registration only needed to be completed with the SEC, not the state regulators. The new registration with state securities regulators has many investment advisers concerned since state regulators conduct more frequent examinations than the SEC. Further, the new requirements mandate that when investment advisers calculate the firm’s AUM, they must include family and proprietary accounts, accounts for which they are not paid, and foreign client accounts, which must be reported on a gross basis, net of margin debt. Many investment advisers, who do not have the requisite $100 million in AUM, are inflating their assets in an effort to be considered an SEC-registered investment adviser. Indeed, advisory firms with assets under the $100 million threshold inflate their assets after calculating assets for registration for image and marketing purposes to clients. This, however, exposes firms who are inflating their AUM figures to potential state and federal regulatory actions for misleading clients. In light of the SEC’s awareness that firms are inflating their AUM figures, the SEC has implemented a stricter program to scrutinize firm’s Form ADV’s and is expected to bring more enforcement actions as a result.